Subscription Apps – Should you use this model?

I’m starting to see this a lot more and we’ve had a chance to test it in a variety of apps. Now it’s time to share..

This is something I think we were a little early on with the type of apps we tried it on. However, it did work and people are getting more comfortable with paying a small monthly charge to use an app. Some even command a weekly charge which is awesome! Often times the subscriptions start with a free trial with an auto renewing subscription until they cancel. The numbers you will see today are from an app that does make the user register to use the app with facebook or email. It does not make them agree to a free trial. The subscription options are offered via a few pop-ups and auto generated emails. There is also a full ala carte in app purchase (IAP) store within this app, but you might be surprised what earns more.

Now the interesting part is that even though we get more purchases of the monthly option, it brings in less revenue as it’s only $3.99 a month. The quarterly and Annual options are cheaper by the month if you divide them out, but it’s up front revenue. So a user for a monthly user might not stick around for 12 charges of $3.99 because depending on the app it can might not be appealing after that time.

However, if it is marketed correctly the annual option is great because even if they quit using the app for whatever reason, you still got paid.

Retention Numbers

(This is from one app)

Users that have been with us at the monthly option for a year are sticking around after that at a 75%

4 Month: 48%

8 Month: 18%

12 Month: 14%

Average Revenue Per Users (ARPU)

Well..I’m sure this is what you want to know right? After all the conversion numbers of:

Page views vs Downloads

Free Trials to Monthly

Non Trial users to IAP’s

Free Trials to IAP’s

Etc

In the same 2 month period all the other figures were pulled August 24th-Oct 24th our Average Revenue Per User was:

ARPU = $5.51

I’m not sure about you, but that’s pretty awesome! That’s more revenue than some of our paid apps priced at $4.99 bring in.

Just to clarify, this is the average revenue of all the users that download the app and turn into paying users. So total revenue divided by total free users.

The Average Revenue Per Purchaser = $9.10

This is the total revenue of the period (2 months) divided by the users that converted into a subscription or purchase of any kind. This is possible as the annual and quarterly options get you that up-front revenue for the quarter or year. If you keep growing, you will always have new users like this that will lift your average revenue numbers.

Summary

This model can be extremely profitable and one you should consider.

You will need to provide continuous value to the users to keep your subscribers and keep Apple Happy. Not every app is a good fit for a monthly charge as you have things like Netflix that’s $9-10 a month and is basically all I watch. There is SO much content. Their app is solid too. So if you are going to ask people for money each month, you have some competition. I didn’t think people compared things like Netflix vs a subscription app, but they do. Weight loss, Fitness, Running, Cycling, Meditation do great with these models as people can justify the purchase. A personal example is Strava. It’s a fitness tracking type app. I am on track to have 4k miles cycled and 500 miles ran for the year so when I go out and run / cycle, I want a solid app that keeps track of things and all the features. If you can tap into something like that, then well, you’ll be set.

I’ll create a video of this info that digs into more juicy details soon. If you aren’t subscribed to our email list, be sure to scroll down and subscribe so you get that video.

After a lot of requests, we are building NEW easy to follow course that teaches a lot of what I talked about above in much more detail. We are also putting together a bundle that will include the course + the iOS and Android templates we used for our new app that these case studies are based off of. To make sure you don’t miss the special offers we provide to subscribers only, CLICK HERE to join our email list.